Gold price falls on firmer equities, dollar after robust U.S. data

New York (July 20)  Gold fell on Wednesday as European equities edged higher and the dollar hit a four-month high following strong U.S. economic data, which raised expectations that the Federal Reserve may raise rates before the end of the year.

Spot gold was down 0.4 percent to $1,325.91 an ounce at 1019 GMT, while U.S. gold dropped 0.4 percent to$1,327.20 an ounce.

The dollar was up 0.1 percent against a basket of six currencies, after hitting its highest for four months on data showing U.S. housing starts surged more than expected in June,
underpinning a theme of strength in the U.S. economy.
    "The probability of a U.S. Federal rate hike has increased
as of today. Some expectations of a rate hike have come back,"
said OCBC Bank analyst Barnabas Gan.
    Gold, which has risen 25 percent this year, is highly
sensitive to rising rates, which increase the opportunity cost
of holding non-yielding assets such as bullion, while boosting
the dollar, in which it is priced.
    The metal was also dragged lower by advancing European
equities, which increased investor appetite for risk.
    "There is a return in risk sentiment across the market in
general right now, as you have more monetary stimulus packages
from central banks," Mitsubishi Corp analyst Jonathan Butler
said.
    "Although more stimulus would also favour no-yielding gold,
when there's pro-risk trading, there's aslo a retreat of some of
those safe-haven elements that have supported the metal."
    The International Monetary Fund, however, cut its global
growth forecasts for the next two years on Tuesday, citing
uncertainty over Britain's looming exit from the EU.
 
    Bullion gained $100 in the two weeks following Britain's
vote to leave the European Union, as worried investors started
putting their cash into safe-haven assets, before falling back.
    "There are still some headwinds to growth and this may lift
safe-haven demand should the implications of Brexit start to
unwind," OCBC Bank's Gan said.
     Spot gold is biased to fall to $1,313 per ounce after
completing its consolidation, said Reuters technical analyst
Wang Tao.
    Spot silver fell 0.7 pct to $19.75 an ounce.
    Spot platinum was down 0.4 percent at $1,084.50,
while palladium, which touched an eight-and-half-month
high on Tuesday, was down 0.5 percent at $653.80.

Source: REuters